Consumers In 12 States Would Be Biggest Losers Under Federal Phone Tax Plan

Plans to modify the USA's federal "Universal Service Fund" (USF) fee on long-distance phone bills, has been criticized by the Keep USF Fair Coalition. Consumers in 10 states already pay more in federal USF taxes than their states get back, and that disparity would grow even wider by billions of dollars under plans by Federal Communications Commission (FCC) Chairman Kevin Martin to change how the USF is collected, according to figures from the Coalition.

Under the most conservative version of the Martin plan -- where the USF fee would shift from a "pay as you go" charge on long-distance calls to a flat US$1 fee per phone line -- 11 states would end up paying more into USF than they do currently. At the more likely US$1.50 per-line USF fee level, Lone Star state consumers would end up nearly a quarter billion dollars in the red on USF.

The Keep USF Fair Coalition's "biggest loser" state calculations are based on state-specific USF collections/payments in 2004 (the first number below) and, with the exception of Texas, a $1 per-line charge (the second number below):

• California ($37.35 million excess paid now, rising by another $184 million under the Martin plan).
• Florida ($248.79 million excess paid now, rising by another $16.57 million).
• Illinois ($127.72 million excess paid now, rising by another $55.48 million).
• Maryland ($117.84 million excess paid now, rising by another $22.81 million).
• Massachusetts ($108.68 million excess paid now, rising by another $59.15 million).
• Michigan ($84.03 million excess paid now, rising by another $52 million).
• Minnesota ($24.22 million "winner" now, flipping to a "loser" of $28.11 million at a $1 per-line fee).
• New York ($89.86 million excess paid now, rising by another $58.22 million).
• Ohio ($84.36 million excess paid now, rising by another $33.24 million).
• Pennsylvania, ($101.14 million excess paid now, rising by another $35.17 million).
• Texas ($116.44 million "winner" now, flipping to a "loser" of $227 million at a $1.50 per-line fee).
• Virginia ($65.83 million excess paid now, rising by another $9.33 million).

The Coalition emphasized that the "biggest loser" state calculations are conservative, since the $1 line charge would only cover about $6.5 billion of the $7.1 billion currently being spent out of the Universal Service Fund. At the more likely $1.50 per-line charge level, all 50 states would end up paying in more than they are getting back. Even at the more modest $1 per-line level, only consumers in Alaska, North Dakota, South Dakota, Wyoming, Mississippi, Montana, Oklahoma, New Mexico, West Virginia, South Carolina and Connecticut would get more out of the USF than they are paying into it.

Maureen Thompson, executive director, Keep USF Fair Coalition, said: "The Martin plan for the Universal Service Fund is bad news for consumers because it would significantly worsen the inequities in terms of who foots the bill for USF and who reaps the benefits of the Fund. The data we are releasing today points out again how no one at the FCC has taken the time to explore the implications for consumers of changing the USF funding scheme. We have been asking the FCC since last year to produce the data to show who wins and who loses under the Martin plan. It is increasingly obvious that they have not been forthcoming with this information because it paints such a damning portrait of switching to 'numbers' or line-based funding methodology.""

Posted to the site on 3rd April 2006